Auburn distributor survives by adapting

Sunday

Nov 18, 2012 at 6:00 AM

Peter Cohan WALL & MAIN

Adapt or perish is one of the most basic principles of business survival. When you consider how much the world of retailing has changed in the last 73 years, you have to conclude that thriving non-foods distributor Imperial Distributors of Auburn has done its share of adapting.

Chief Executive Officer Michael Sleeper explained in a Nov. 5 interview that his father, Frank, started Imperial in 1939 in the depths of the Great Depression. He dropped out of night school at Northeastern after a bout of acute appendicitis. Frank's business started with a first-aid kit, which he sold door-to-door and to corner grocery stores. He would pay the supplier when he purchased the first-aid kits and collect his payment from the corner store when he refilled the rack where the kits were displayed.

He bought the metal boxes for the kits from Woolworth's on Front Street in Worcester. He asked the manager of the store, “What if I buy a couple of cases of these boxes, can you sell them to me at a better price?” When he learned that a New Haven, Conn., company made the metal boxes, he bought them direct to cut his costs.

Frank was highly motivated to boost Imperial's revenues. According to his son, “My father figured out that if he could sell $50 worth of first-aid kits a week he would have enough money to get married.”

He achieved his first goal, bought a box truck, and warehoused his 50-item inventory in his garage on Holland Road in Worcester. When he visited his customers, he sat on a rotating piano stool inside the box truck to pick items out of his inventory before stocking the retailer's shelves.

Corner store grocery businesses grew, and soon they expanded to supermarkets. In addition to first-aid kits, Frank sold a cabinet of health and beauty products. The first one-stop-shop grocery store in Worcester, Grand View Market on Stafford Street, was a big customer — as were Iandoli, Big D and Hodes.

Today, Imperial Distributors is the largest privately held distributor focused solely on supermarket non-foods. It services 2,600 food stores in 22 states as well as Puerto Rico and Bermuda. According to Mr. Sleeper, Imperial's customer list includes “most of the major chains in the Northeast and hundreds of independent grocery operators.”

Its two distribution centers stock 24,000 items, including health and beauty products, cosmetics, housewares, pet supplies and toys. Seasonal merchandise is “a growth engine for the company,” said Mr. Sleeper.

Imperial must understand the different needs of customers with varying income levels. For example, Imperial sells “prepared, natural, upscale” items to premium retailers and lower-priced items to value retailers who serve a “lower/middle income demographic,” according to Mr. Sleeper. He explained that Imperial's category managers are “experts in non-food products, from choosing the right assortment to pricing, promotions and merchandising.”

Technology and financial systems are essential tools for managing all this complexity. As Mr. Sleeper explained, “Technology plays a critical role in tracking, managing, pricing, delivering and servicing the more than 200,000 pieces picked and shipped to retailers each day.” And when Mr. Sleeper joined Imperial he strengthened its financial capabilities.

“We have a very strong financial team, a strong balance sheet and solid financial controls,” according to Mr. Sleeper.

And timely payment of bills is critical to survival. As Mr. Sleeper explained, “The manufacturers — such as P&G and Unilever — have a credit committee. If a distributor is late paying its bills in one month, they all know about it right away. We have to pay live funds within 10 to 19 days of receiving goods from them.”

Imperial must also manage inventory and customize logistics to specific customers.

As Mr. Sleeper said, “To be efficient, Imperial effectively manages inventory levels and develops distribution, logistics and transportation strategies that work for the diverse retailers it serves. For example, some retailers do cross-docking; other customers get items delivered by Imperial directly to the store; while still others require delivery to their local grocery warehouse.”

Imperial has also invested heavily in service. While the meaning of service has changed over the years, today Imperial has 500 team members who spend each workday in grocery stores, ordering products using hand-held technology, stocking shelves, merchandising and creating displays.

“This is a long way from the early rack-jobber days when we just emptied boxes and filled shelves,” according to Mr. Sleeper. “In those days, there were more than 250 companies like Imperial in our trade association, but only a handful is still in business today. The needs of our customers changed, and so did we.”

It does not appear likely that a third generation of Sleepers will run Imperial. Mr. Sleeper's son is a doctor and his two daughters live in New York. They are not involved in operating the business. So Mr. Sleeper has regular conversations with his board on leadership succession, and is grooming high-potential employees for future key management roles.

No doubt Frank would be proud of how well Michael has kept Imperial going. Will its next generation of management do as well?

Peter Cohan of Marlboro heads a management consulting and venture capital firm, teaches business strategy, and is the author of 11 books – most recently, “Hungry Start-up Strategy: Creating New Ventures with Limited Resources and Unlimited Vision.” His column runs Sundays and Wednesdays on telegram.com. His email address is peter@petercohan.com.